Question

A project of Rs. 20,00,000 yielded annually a profit of Rs. 3,00,000 after

depreciation @ 12.5% and is subject to income tax @ 50%. Calculate payback

period.​

Answer 1

Explanation:

Profit after depreciation 3,00,000

Tax 50% 1,50,000

1,50,000

Add depreciation

20,00,000 1 12 %2 2,50,000

Cash in flow 4,00,000 Pay-back period =

Investment

Cash flow

= 20,00,000

4,00,000 = 5 years.